Chair welcomes Carbon Price Floor Cap

19 March 2014

Commenting on the Chancellor’s decision to cap the Carbon Price Floor, Tim Yeo MP, Chair of the Energy and Climate Change Committee said:

"Capping the Carbon Price Floor and exempting the fuel used in Combined Heat and Power generation by manufacturing firms are both very welcome steps. As the Committee has previously noted, the Treasury’s decision to introduce a unilateral tax to top-up the EU carbon price actually did very little to reduce emissions overall, despite penalising British energy consumers with higher costs.

"As the price of carbon was so low in the EU Emissions Trading Scheme, any emissions reductions the Carbon Price Floor delivered in the UK simply allowed other member states to emit more. As such it was seen by many as a revenue raiser for the Treasury that damaged public trust in taxes on pollution.

"Freezing the price of carbon here could also eventually make dirty polluting coal power stations more economically viable in the UK. This could potentially divert investment from some cleaner technologies including gas.”

The Energy and Climate Change Select Committee warned in Jan 2012 that the decision to set a unilateral Carbon Price Floor could have a "devastating effect" on UK industry and artificially raise electricity prices for consumers, while having no overall impact on emissions.